While it might be an undeserved stereotype for some, a large percentage of Millennials have different views when it comes to personal finances than the previous generations. In fact, 62% of Millennials admit that they’re living paycheck to paycheck. Baby boomers, for example, wanted to save money and retire, which was when the “fun” would commence. Well, most Millennials don’t want to wait. They generally prioritize fun and experiences over saving money and being financially responsible.
Is it possible for Millennials to have the same mentality while achieving financial freedom? Samuel Leach founded his company, Samuel and Co. Trading, at age 21 and reached millionaire status before age 28 by carefully investing and following a strict financial plan to grow his business while paying off debt. Along the way, he discovered a couple of the key mistakes most Millennials make that is costing them their financial independence.
1. Unnecessary, Careless Spending
Millennials spend with little consideration of the long term effects; especially when it comes to convenience items and services. Things like music downloads, in-app purchases, streaming services, etc. — these are all unnecessary spending, especially if money is tight. These type of expenses typically hit the user’s debit or credit card at random days of the month, so it’s not always easy to get a clear picture of just how much is going out every month.
“I have staff members that are Millennials, and I see it daily. They overuse apps such as Uber and Deliveroo; it’s crazy how easy it is now to two-click a ride or order food delivery,” explains Leach.
2. Setting Unrealistic Financial Goals
You would be very hard pressed to find a lot of Millennials that have an emergency savings fund for unexpected events or circumstances. They also aren’t afraid to rack up credit card debt.
“Millennials need to focus more on intermediate and long-term goals — thinking logically about life-events. Intermediate goals include larger expenses that will take longer to attain. Examples include saving a down payment for a house, or buying a new car. For Millennials, the reality is that retirement income is unlikely to include Social Security or a pension income. They need to save more of their income than any prior generation,” says Leach.
3. Drowning in Debt With No Plan to Pay it Back
Millennials are taking on massive amounts of debt, with no sound plan on how to pay it back. Entering the workforce with student loan debt and racking up credit card debt can create a financial disaster. Millennials need to limit entertainment expenses and cut costs by utilizing public transportation and reducing living expenses. “Living rent-free with family or with roommates are ways to pay off debt quickly. I lived at home when I started my business, which eliminated the debt I would have taken on had I moved out,” offers Leach.
Many professions also offer government student loan forgiveness after a certain number of years, regardless of the balance owed. These are great options for those struggling with student loan debt. When dealing with short-term debt like credit card debt, Millennials should try to stick to a traditional budget and should avoid using credit cards as a backup to pad a monthly budget that is simply beyond one’s means.
It’s possible for Millennials to become financially sound for years to come. Much of their adverse thinking is attributed to their generation and their priorities. It’s a matter of striking a balance between splurging and enjoying life day to day; all while saving and preparing for the future.